Podcast Details

Episode 21

Sean O'Dowd

Ever wondered what it takes to transition from a hectic consulting business into the dynamic world of real estate investing? Our guest, Sean O'Dowd, generously shares his journey from helping his parents move frequently, to becoming a real estate mogul. Sean doesn't just share his experiences; he enlightens listeners with valuable insights into the world of property investment, emphasizing the importance of a long-term perspective, and the potential impact of economic and political factors on home buying trends.

Drawing from his wealth of experience, Sean explains what makes a property investment successful, dispelling myths and offering concrete guidance. He dives into the concept of Class A property and the significance of a three-year lease, and how these factors can drastically reduce maintenance costs and increase profitability. Listeners also get an insider's view into Sean's meticulous 17-criteria property selection process for his fund, which is designed to meet the standards of larger funds, thus allowing for minimized insurance costs and increased NOI of portfolios.

In this riveting discussion, Sean also provides insight into the real estate trends in Minneapolis, offering a unique perspective on the influence of local politics, billionaire residents, and new developments. He emphasizes the value of long-term thinking and shares tailored advice for other real estate investors looking to maximize their success. Plus, don't miss out on Sean's book recommendation and how it ties into his real estate journey. So buckle up and get ready to absorb a ton of knowledge from one of the industry's best.

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Key Takeaways

1. The importance of location in real estate investment: Sean O'Dowd stresses the significance of investing in Class A properties in top-tier school districts. He suggests that such properties can guarantee a right to win a better tenant and offer a competitive edge in the real estate market.

2. Long-term thinking and planning in real estate: O'Dowd emphasizes on thinking long-term and putting in the work that others don't want to do. This strategy, combined with his focus on properties in elite school districts, significantly lowers maintenance costs and boosts success as an investor.

3. The role of local environment and trends in real estate: The podcast discusses the influence of local policies, the impact of new developments, and how the presence of affluent individuals can shape home buying decisions. O'Dowd also provides insights into real estate trends in his hometown, Minneapolis, highlighting the importance of understanding the local environment when investing in real estate.


0:00:00 - Vikas Gupta

This is the hacking real estate podcast episode 21. 

0:00:05 - Sean O'Dowd

I think the the number one piece of advice that's been at least most helpful for me in my career is to think with a long-term Time, long-term lens and put in the work that others don't want to do over that long-term lens. So, for example, like thinking about what's gonna be great about one home for versus another for 30 years from now, like a really good school district is not gonna change 30 years, and putting in the work Like we talked about, like the first thing, first thing we look at is the great schools which everybody can do. It takes 30 seconds to do. The thing that kind of sets the differentiator apart is we then get on the phone with a lot of people and each one of those zip codes and figure out the perception. That's a lot of work and very, very, very few people do that extra step. It's also very easy to do just pick up the phone, start dialing. So Long-term lens and then putting in the work to fulfill that long-term lens is then what's differentiated things for me. 

0:00:58 - Brandon Hall

Welcome to the hacking real estate podcast, where we dive into the stories of seasoned, hands-on and tech savvy real estate investors. We'll learn the strategies and tools they use to maximize returns and minimize hassle, all while navigating the rapidly changing real estate market. I'm your co-host, brandon Hall, and managing partner of Hall CPA, and I'm sitting alongside my co-host, vikas Gupta, ceo of a Zebo. With our combined 15 years of experience in real estate investing and entrepreneurship, we're here to help you up your real estate game. Let's get hacking. 

0:01:30 - Vikas Gupta

Hi everyone, welcome to the hacking real estate podcast. Today's guest is Sean O'Dowd. He is an entrepreneur and real estate investor. He built a consulting business in his early 20s and used all the profit to buy class a single family homes in elite school districts. He's now the general partner of Scholastic Capital, a real estate private equity firm Focused on single family homes in elite 10 out of 10 high school districts. Welcome to the show, sean. Thanks for joining us. 

0:01:58 - Sean O'Dowd

Hey, thanks for having me. 

0:02:00 - Vikas Gupta

So, in your own words, can you tell us about your real estate journey? 

0:02:04 - Sean O'Dowd

Yeah, so you know it's actually interesting. So I'm in Chicago right now, suburbs of Chicago. I was actually born here, like five minutes away that direction, but I moved 22 times before I actually went to college. So that was actually like the start of my real estate career. Every to call it, nine months or so we were. We were on the road looking for somewhere new to live. 

That's just wasn't like down the street kind of goes. We were bouncing all over the country, bouncing international, and you know dad was working, mom was super busy with a lot of the logistical aspects of the move. So my job from like Honestly under 10 was to like work with the agents to help find the place for us to go rent or buy whatever we were doing. So that was my intro. That was my intro to real estate. I got took the whole like agent licensing course as soon as I could was in New Jersey at the time and it kind of sparked a love that that never really stopped and it was always really just question of when not if when would start investing in real estate and maybe even work in real estate full-time. 

0:03:03 - Vikas Gupta

Cool. And where are you today in real estate? 

0:03:05 - Sean O'Dowd

Where I am. So it's actually kind of a kind of a press office and training point for me right now. So I've been running the consulting business that you mentioned and been using basically the profits of that to buy real estate. I'm now Transitioning, shutting down the consulting business and now raising a real estate fund. It's cost a capital one you mentioned and I'm full-time in real estate, which is kind of a really interesting Journey that it's been, and seven or eight year old Sean, who's helping mom find a new house, would be kind of surprised about that's a full-time job that someone can do. 

0:03:37 - Vikas Gupta

Mm-hmm and you're and you're focused on a very particular Set of criteria right ten out of ten school districts. Can you tell us a little bit more about that? 

0:03:47 - Sean O'Dowd

Yeah. So you know, it's actually really interesting. We, when I first got started in real estate, first buying properties I was was relatively young, me and my girlfriend at the time now my wife was like hey, we should, we should get started real estate. If we pull our money together, we can do it. And At the time we were, we were new, we didn't really know a lot about what we were doing and we were kind of obsessed with this idea of Doors and you want to have as many doors as you can. You want to have these multi-family properties, one roof easier to manage, the whole Whole nine yards. So that's exactly what we did. We. We found a seven-unit property at a price we can afford it, which at the time was, I think, 150 grand. We bought it for. So seven units at 150 grand. This was not not the nicest place in the world and we were like great ran, we're doing it. We made exactly zero money. In fact, we were losing money pretty much every month because there was always something that broke or fixed and Tendons were staying in the property for 45 days before moving out and it was just a total, complete mess. And we didn't learn a lesson and we then we did it again. We bought a six unit. This time I was 200 grand, but again very, very similar story. So we, we did that for about a year and a half. We sold them both and kind of looked our wounds and said, hey, like this, this is not at all what we thought it was gonna be. What went wrong? And so I'm a consultant my wife is actually also strategy consultant so we we really started thinking about it from that lens of and consulting. 

There's a phrase that's used a lot called right to win, which is like what is what is a company's right to win in a particular category? Like why, why does Coca-Cola have the right to win in the beverage category compared to Pepsi? And for us we started thinking about it like what can give our properties the right to win a tenant compared to any other Property out there? Like we're in the Chicago area there's literally millions of housing units within an hour drive of me like why is one have a better right to win than the other? And we, we were really focused on that concept and we're kind of looking for different, different things that could be the right to win, and we we realized the biggest one that we could think of was was school district, and Not just a good school district, but like, absolutely elite, like the best school district in the Chicago area, no matter what, is always gonna have a lot of interest from tenants to move to that area Because they want their kids to go to that school. And what we found when we talk about these really elite school districts is they've always been elite. 

This is not like a popped up recently, it's everybody knows the school, everybody's gone to that school. It's the place to be. So we said, okay, let's do that. So we bought one home to kind of test it out. Our agents thought we were nuts. They're like you can't buy rentals in the zip code. It doesn't work. But we're strategy consultants. So we built a model and we've said we think we could make it work. And that home blew our expectations out of the water. She said, okay, we'll do it again. And our agents were like your nuts, like don't do this. I got lucky last time and that blew our model out of the water again and then we just kept doing it and we said like, hey, we're actually we're on this something here that this, this right to win being a really elite high school district. 

0:06:58 - Vikas Gupta

So right to win a given market heavily depends on how you're defining that. So to make sure I understand, so, so your thesis is that the market is a broader geographic area, not just that school district right. So your thesis is like we're competing against a bunch of other rental properties, many of which are not in the school district, as opposed to you ever right to win against the house next door. 

0:07:27 - Sean O'Dowd

Correct, that's exactly right. We're defining, like the zip code, as having the right to win compared to all of the other zip codes, and sticking the Chicago example, the Chicago area. 

0:07:38 - Vikas Gupta

Got it, at least in where I live in the Greater Los Angeles area, there is a massive price differential between the same quality of house in a good school district versus in an average school district. So even with that price differential, are, like, the rents sufficiently higher such that you're overcoming that price differential? Or walk us through some of the economics of rentals in those areas. 

0:08:05 - Sean O'Dowd

But the short answer is yes, like it can overcome that. And the reason why is we're basically talking about supply-denying balance. Like if you're talking about buying a home in a really great school district, your supply like they'll probably end in giving point 30, 40, 50 homes on the market, depending on the size of the metro. But if we're talking about the rental market, like, investors aren't buying in those zip codes because they're really expensive, those homes they're buying the living on themselves. It's not uncommon to see one rental home and the entire zip code on the market. So your price premium is certainly higher on the purchase, but the price premium is even higher in a comparison on the rental side of things and that's why the math ends up working out. But we'll give a super concrete example. Our most recent purchase was in one of these zip codes in the Chicago area. We bought the home for $520,000 and it's on a three-year lease with annual escalators at $4,500 a month. So we round up the escalator, so they're rounded, so it's $45,000, $46,000, $47,000 for the rental payments and it's a fantastic home, really high quality, it's a great place to live and that's really. 

The other key part of this thesis is the multi-year leases, because there's no rental supply in these areas. Tenants are like oh my God, I'm so happy there's a home available. I didn't think I was going to live in the zip code. I didn't think I was going to be able to get my kids to go to this high school because I can't afford to buy here, which is what we hear really consistently. But because of that and this is one of the things that really surprised us about this thesis when we first got into it is tenants unanimously ask for multi-year leases Because they don't want to risk going there for a year and then losing the home. So we can basically lock in a long-term lease, we can lock in no turn costs every year and we can also lock in those annual rent escalators because we're signing in onto the three-year lease from there. 

0:10:01 - Vikas Gupta

Got it. So if I'm a tenant and I can pay that much for the rent for a $550,000 home is the only reason I can't buy it, because I can't put the bound payment down. 

0:10:13 - Sean O'Dowd

There's a variety of reasons that we've come across. So in one common tenant archetype is that, hey, I have enough income for my day-to-day job. I'm a lawyer, software engineer. Those are the kinds of people we see who come to rent these homes, but I don't have enough capital for the actual down payment. That's actually, we'll call it, the second largest archetype, though the largest archetype that we come across most frequently is the short-termer. 

It's somebody who says, hey, I want to be in the zip code for four years for one kid, or six years for two kids, two years apart for the kids to graduate school. But because I'm a doctor, lawyer, software engineer, I'm smart enough to do the buy versus rent analysis, and the break even on that for an expensive home is typically seven, eight, nine years. And they're like, hey, I only want to be here just long enough for my kids to get the diploma from this high school, so it's shorter than the buy versus rent analysis. So they say I'm just going to rent we. There's a bunch of other archetypes that we do see. Those two are probably 70% of the total pie, though. 

0:11:18 - Vikas Gupta

Yeah, so that's really interesting. So the more successful you are in educating the world, presumably the smaller that first bucket gets right, because then I would just move out and keep the home and rent it out and be cash flow positive and go wherever I'm going. 

0:11:34 - Sean O'Dowd

Then yes, assuming you don't need the equity to sell the home to go by the next one. They're like yes. 

0:11:39 - Vikas Gupta

Well, the world's a big place. 

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0:12:19 - Vikas Gupta

So, going back to right to win, so you know right to win. We talked about geography. I mean, winning is also like what are you winning? So again, my assumption here, my hypothesis here, is you're talking about, like I'm going to win, a better tenant. Is that right? 

0:12:35 - Sean O'Dowd

It's from our perspective yes, it's we win the better tenant. From the tenant's perspective, that home has the right to win because it's the only one with the address that goes to the high school that they want their kids to go to. 

0:12:50 - Vikas Gupta

Then, comparing that with your six and seven unit property experiences, is it really come down to tenant quality or were there other items with those, other issues with those properties that let them to be investments that didn't pay off? 

0:13:08 - Sean O'Dowd

There is the two biggest. There's a variety of different ones, but the two biggest that it comes down to is maintenance costs and management burden. On the management burden side, I think we did that first because that's the easier one. Just leasing If we're talking about a lower-classy property, you're going to be releasing that property quite frequently. Tenants are going to be coming in and out quite frequently. We're talking about a class A unit that is on a three-year lease and a highly desirable one at that. We rent these things in 48 hours when we put them on the market because it's the only game in town. And three-year leases it's 48 hours worth of effort every three years. So the management burden is way lower. 

Then, on the maintenance side of things, there's two big important components to this. The first side is we're buying the home from an owner occupant who took really good care of it because it's a really elite school district. They were protecting their own equity. We aren't buying it from a landlord that was cutting corners or a management company that was cutting corners here and there. We're buying into an asset that's a really great shape right off the bat. That lowers our maintenance burden. 

Then number two on the maintenance burden side of things and this is one of the things that really just blew our minds about this thesis. Out of our existing properties, 100 percent of our tenants have repainted the interior of the homes the color of their choosing. Two-thirds of them have refinished cabinets, kitchen cabinets, and then two-thirds of them have swapped out at least half the life pictures in the home Because they're there for three-plus years, like they're putting their own money into it. We didn't pay for any of that. We didn't know about it for most of those cases because they wanted to make the place nicer and there's because it is truly there. 

They're there for at least three and in most cases two-three releases of six years. Because of that, the maintenance side of things is actually relatively lower. Our tenants are 45 to 55-year-old Midwest dads who want to get the drill out. If we hear from a tenant for a maintenance request, it's something beyond the capabilities of a 45-year-old Midwest dad. It's something that you need a license for electrician, a plumber, a roof, something like that. Anything we call it minor they take care of Because they want to, because it's one weekend activity. 

0:15:22 - Vikas Gupta

They're probably calling you right away if something major happens. I was talking to someone else and he said his tenant called him and said hey, the washing machine's been leaking for a while and now the carpet's rotting. Can you fix it? Now? Imagine your tenant is probably calling you the minute that they find the leak, if they can't fix it themselves. 

0:15:41 - Sean O'Dowd

That's true. So we have a lot of data compared to some of the bigger single-family home operators. We've got advisors to our front who work or have worked at those places or have sold their portfolios to those places and we get way fewer calls than they typically do. But our average ticket is a lot higher because when we do get the calls to your point it's immediate and it's an important thing that needs to get there. So are you self-managing? It sounds like you are, we are. So we have basically a management entity that takes care of these things. That basically cost, because the standard property management firm wants to charge 7.5 to 10% for single-family homes. They don't want single-family homes, they want the 300-unit apartment complex. So it doesn't make economical sense to do that at 7.5 to 10% when we could manage them in-house at 3%, 4%, 5%. 

0:16:27 - Vikas Gupta

And so do you have a staff, or are you the staff? Are you the property manager? 

0:16:31 - Sean O'Dowd

So for existing portfolios it was my wife and I for the fund, so I've got a partner in the fund, another general partner and then we'll build out a small team that can handle more properties per person because the management burden on lease is lower, on both the management or leasing and maintenance site. 

0:16:48 - Vikas Gupta

Going back to your first two properties, it always surprises me when first experience not great and then people get back into real estate and then they find some winners. But two experiences not great, so we're like what kept you going? 

0:17:00 - Sean O'Dowd

It was honestly the moving so much and real estate is truly my passion. My wife calls it my scroll. I have a lot of searches saved on Zillow and for fun, my weekend activity with coffee is scroll Zillow. I go to open houses for fun. It was never going to be away from it for long. It was a question I hadn't gone in blindly without really thinking through a detailed thesis of what's something that makes sense to be doing and protects capital rather than taking a flyer on a. Hey, this sounds like an interesting idea where it just wasn't a good long-term thesis for us. 

0:17:38 - Vikas Gupta

So what made you decide to start a fund, as opposed to just continuing and going and buying additional properties under your own name? 

0:17:44 - Sean O'Dowd

You know, for the longest time I really didn't want to start a fund. I had heard podcasts from individuals who had gone down that path and I was like you know, that's not something I want to do. I want to 100% own my properties. And what happened was actually Twitter. So I started a Twitter account gosh years ago during COVID, because I was working from home. I was kind of bored and I just started posting about what I was doing, both on the consulting side at the time and on the real estate side, and I started getting some inbound messages from people about hey, the next time you buy one of these things, can I take in some money? I was like, oh wow, that's cool. I wasn't expecting that at all. And I started getting more and more of those messages. So then I started. 

I talked with a lawyer, a really fantastic lawyer, who specializes in fund creation and he creates a ton of these. And just to understand what it would look like, does this make sense, that sort of thing and we did our official legal sales call. He works for one of the really big law firms out there. He creates the fund box for some of the big funds that you know the name of and he circled back with me after we had our conversation and he said, hey, I see these all day long. 

I think this is one of the best these I've seen. Can I join you as a partner and do this with you? And I was like, whoa, that's really strong. That gave me a lot of confidence, like, hey, this is actually something that there's a day there If somebody who's seen a lot of these things, they have a lot of credence. So, fast forward, six plus months and a lot of conversations and he's actually my partner now at the fund that conversation kind of helped give me a lot of credit, feel that there's credibility behind what we were doing, and one thing leads to another and here we are. 

0:19:35 - Vikas Gupta

Got it and with the fund you had mentioned, sort of potentially selling it to a larger fund down the road, is that the plan? Is that the hey we're going to get to a minimum size and then sell it off and move on, or is it? You know, how are you thinking about? I guess this is like the private equity version of the VC question of how are you thinking about exit opportunities, which is a question I personally hate, but now I'm putting it onto you Totally okay, totally okay. 

0:20:04 - Sean O'Dowd

So it's it's an interesting thing. We thought about it. Honestly, it goes back to the consulting question of like begin with the end in mind. So everything we buy is cash flow from day, positive from day one. Like we're going to be sending distributions out to investors monthly, which is unique. Most do quarterly. We can do monthly because we've got the cash flow security of the three releases. 

But investors are going to want their money back at some point. They're homes full of appreciate, there's equity paydown from the note Like it. Just investors are going to want that cash out. So some point between 10 and 15 years we're assuming 12 for simplicity in the model we're going to sell the properties and the most likely buyer is a larger fund. But consulting began with the end in mind. We've basically called up people we know at those larger funds and have said, hey, if we build this for you, give us the exact profile of what you would like. And they've all been super receptive to that because it's in their best interest to give us those metrics, because then we'll build the exact profile of homes and location they want. So we have like 17 different criteria now that we're running our homes against when we are underwriting, to make sure that it's something that is one of the funds are going to want. 

So minimally, three bedrooms, mainly one and a half baths, preferably two minimum square footage count. There has to be a Costco within five miles, no high capacity power lines, with probably no double yellow lines on the roads, which is a really interesting one we never thought of. It's got to be a neighborhood, it's got to be got to be slow, slow driving area. Then the other really interesting that kind of thing that kind of came out from this is we were kind of thinking about hey, like let's, there's really good school districts everywhere. La, for example, there's a lot of Connecticut, greenwich, there's a bunch of New York, scarsdale, there's a bunch of really good ones in Dallas, highland Park, florida, there's a lot of really good school districts everywhere. 

But the universal answer we actually got back from the funds was we want them up, we want these homes up from Midwest, and the reason why that they were getting back to us on this was climate and climate risk and they were saying, hey, we are, we're getting crushed on our insurance costs and they were giving us specific numbers of home communities where they underwrote them at $1,000 in door and Florida. 

And now the home community, the BFR community, is not finished and it's way higher cost. They're like it's not sustainable. And they have really good close relationships with their insurance partners because their insurance partners they're 30,000 plus 100, the insurance like they matter. The insurance partners are giving them the heads up like hey, we're going to keep increasing your rates over the next five to 10 years. The funds were telling us like hey, if this continues the way that the insurance guys are telling us, five to 10 years from now, your portfolio in Minnesota to Wisconsin, illinois, might have the lowest insurance cost in the country and be the highest NOI portfolio as a result. If that's the case, the quote was like hey, you can name your price, which is obviously hyperbole, but for the investor's sake it just. It makes the most sense to buy really great school districts for the cash flow now, but in upper Midwest for the sale down the line. 

0:23:11 - Vikas Gupta

Got it. Now my head is spinning with questions. What I really want, that full list of criteria? 

0:23:17 - Sean O'Dowd

but I can give it to you. I'm happy to walk through it. 

0:23:22 - Vikas Gupta

Yeah, no, that'd be. I think that'd be really helpful. So you mentioned like five or six. What's the rest on? Or you know some of those make sense. The Costco one was interesting, you know, the double lines was an interesting one, without necessarily perhaps going down the full list, like what else jumped out to you. 

0:23:37 - Sean O'Dowd

So there's a bunch of other ones. The the no pools one was was really interesting. We thought that would be a nice thing for the tenants, but Non-starter was the way it was described is the pool because of like insurance and maintenance or exactly Because they. They're at such a scale that they looked at and they go. If we have enough pools in the portfolio, there is going to be some sort of tragic health situation that happens at every year if we have too many pools in the portfolio. So that's a non-starter for them. 

Yeah the WL line thing was my personal favorite out of all of them. There's a. There's a noise component, so there's actually it's called how loud. It's a Software that basically says how loud is each individual home for a variety of different noise factors. It's got to be quiet. Basically means no, no airplanes going over, coming into landing, no big roads. 

There's a negative, negative view from a. From a location to a prison or jail. It can't be within within five miles of any of any kind of temporary. There has to be the Costco within five miles. They would like a Starbucks within one mile and then School score anything below a five. Is it just a non-starter for them? That's pretty all they're fine. 

It was a three. That's not gonna be an issue for us because it's it's 10 across the board. Got a. We've got a whole bunch of them. Minimum square footage, minimum year. I mean I've got our whole underwriting sheet is actually right here. Yeah, that's most of them right there. The ones that we just just ran through, some were non-starter HOAs. Some do allow HOAs with very specific covenants. The whole HOA thing is it's a whole can of worms right there. No redistricting, especially if our school district is based on the thesis of school district base. There can't have been a redistrict in the past 10 years because then you'd be a written a be a Redistrict. Risk related to that is no school choice. Also would be would be negative against the pieces as well. 

0:25:30 - Vikas Gupta

Are there? Is there anything else you look at, so like? Are you looking at potential for you supply? Are you looking at job and income growth? Are you looking at Property tax or regulatory changes or rent control or sort of like? What else do you look at? 

0:25:42 - Sean O'Dowd

Yeah, so that's everything that's called like, like individual asset levels, how we think about on the home level, on the zip code level. There's a lot that we look at right off the bat, like our first screen is the school scores, like we don't look at anything, that's a low score, so we use grade schools is like our first screen. Basically, we and we, we take everything up from Midwest, that's above, like we look at it at high school as the driver. But we also look at it as an aggregate. So we want the aggregate score at a minimum to be at 21 for us to even look at it, which was like aggregate being lower middle and high school. So seven average across the board. We have never find that up to a 24, so eight average across the board. But once we have that, that's, that's the data. Then there's a perception question, and perception is More important than the data because the school needs to be perceived to be highly elite. So that's that's a lot of phone calls, expert interviews type situations. That's on One of the school elements. Though the next one that we look at, we have a data set that's awesome, we found it online that shows you the percent of graduating students that go to an Ivy League school or Ivy League equivalent. So Stanford MIT is also included in that list. We have a minimum threshold on that. We want at least one and a half percent of the graduating class to be going to one of those schools Optimally higher, and some of our students are a lot higher than that. 

On top of that, from there, who goes specifically to the, the district as a whole and outside of the school concept, the single most important metric for us is owner occupancy rates. It's got to be at least eighty eight percent owner occupied, because that that means there's there's not a lot of room to supply and that that twelve percent of rent is almost always a Like nineteen, fifty's apartment building. That was in the area because the, the homeowners in these areas, tend to be like the, the final boss of NIMBY, and they do not allow new construction apartment buildings in these areas at all. So owner occupancy rates very important. Household income very important. That kind of dictates what what tenant rent tenants can pay. No redistricting in the last, the last ten years, no school choice. 

And then there's a bunch of additional things that we look at from a Home and relationship to where it is in the actual zip code as well level. So there's, there's a, there's a lot that kind of goes into it and it's different cuts. So, being on coming down to the zip codes that we look at cutting it down, then to the homes within the zip codes and then, once we're under contract in the homes, then there's a bunch of like final additional checks that we do, which happy to get into what that looks like. But there's, there's a whole, there's a bunch of it. You can imagine. 

0:28:21 - Vikas Gupta

Yeah, so we're looking at the upper Midwest. You mentioned NIMBY. How much are you paying attention to things that are going on in Minneapolis, for example, which is starting to really relax constraints on development, at least relative to where they were five years ago? Are you tracking those trends? Are you factoring that into your equation? 

0:28:43 - Sean O'Dowd

We are factoring that in, so it's one of the ones that I didn't mention because it's up my mind, but that's a very important thing for us. 

So we can look at the number of single family permits issued by year for any specific zip code and we have a percentage threshold that we're looking at. If they're issuing more than 50 permits a year, we don't want to be in that area and we also do not want to buy in a zip code that has a lot of vacant land, because that's just, that's just waiting for Linnard to be able to be a far community poll, to be able to be a far community and for the supply, demand and balances in the area to be upset. The way we think of it is we solely want to be in zip codes with no buildable lots left, and what we found in the zip codes that we're in, those 50 single family homes, are almost always someone buying an older home, knocking it down and putting up $3 million house up that they're going to be there forever. If, to your point, if there's development, it'll it'll absolutely upset the supply demand imbalance. 

0:29:42 - Vikas Gupta

Yeah, I mean I sort of again being in Los Angeles, there's a lot of constraints on development, there's also no land, but there's sort of like a burgeoning anti-Ninby political movement. I've been reading a lot about what's been happening in Minneapolis so I'm sort of curious about how you're thinking about that kind of stuff. 

0:30:00 - Sean O'Dowd

Yeah, it's tough. I mean, the really good school districts are really awesome and we want to help make them more accessible, which is literally what our homes are doing. But and if I can wave a magic wand, like the policy way to do it would be to build more apartment buildings. But it's just, it's not, it's not feasible in these zip codes. I mean, I can forgive you. Here's an interesting stat In almost every single one of our zip codes there's a billionaire who calls it their primary residence and they are, in most cases, are sending their kids to the local private school or, excuse me, the local public school. 

There's not a private school that makes sense to do because the public schools are higher ranked and they have the money to donate to the mayoral candidate who says they're not going to do anything. And 10 grand in a mayoral election in the Midwest City is enough to kind of put the thumb on the scale. And for that reason, like there's one of our zip codes, there was actually a townhome project. It was like a 12, 12 unit townhome and it was for sale townhomes and it was like a seven year process before the city kind of finally get, finally give approval for it. 

0:31:11 - Vikas Gupta

Oh wow, so is billionaire in zip code one of your, one of your criteria. 

0:31:15 - Sean O'Dowd

It's something that we were not actively looking at, but it actually was something that kind of like kept coming up of like oh there's, there's a billionaire in this one, and then we would look at the next tip. Don't be like, oh, funny enough, like there's one there too. So it's not a, it's not a leading indicator we look for, but it's kind of an outcome of of the kind of places that we're buying. Is this kind of the places that leads to believe you're doing their living? 

0:31:37 - Vikas Gupta

there. Yeah, yeah, that's really interesting. I want to come back to something you mentioned at the top of the top of the podcast. You said you know you were, you were looking at looking at homes. You know from the age of 10 or earlier. How has your criteria changed from a 10 year old to where you are now? 

0:31:55 - Sean O'Dowd

It's a good question, I mean so when I was at 10, I was thinking, thinking about like finding, helping that family find the home, and it was. It was like what's available and what can we get in because we're moving we had to move fast. I think what's what's largely changed is 10 year old Sean was really impressed with like the flashy stuff, like the newly remodeled home and the home that looks, looks really good in the pictures and what. What I've kind of evolved and changed from there is that flashy, like nice looking home is not a competitive advantage. There's actually nothing super special about that. 

That flashy home that looks great now, five years from now, is going to have a lot of wear and tear on it and that design is not going to be the new flashy design of five years from now. It's not a competitive advantage. Like it can, it can change and it will change and it will will be condated. And today I think about homes and real estate from what is a evergreen inherent, not going to change no matter what competitive advantage, to a piece of dirt and for me that's the school districts and it's that that piece of dirt will always send its residences to its tenants, its owners, whoever it is, to that high school district. And if you can put a nice home on that piece of dirt, then you're your golden there. 

0:33:17 - Vikas Gupta

Great, well, this has been fantastic. Also, super information, dense, and I would expect nothing less from a former consultant. So thank you so much. You know, I think, if your game, we can go into our three final closing questions now. So question number one what is your favorite book? And it doesn't have to be real estate related. 

0:33:35 - Sean O'Dowd

Yep, my favorite book by far. It's kind of one that applies under the radar. It's called Hero of the Empire, by about Winston Churchill. It's about Churchill in his 20s and when he gets captured and imprisoned. But what I love about the book is like, 22 year old, winston Churchill was absolutely convinced his life, destiny and goal was to be prime minister. And it's about how he was taking steps in what was literally going to be a 30-plus year journey To go get there. And it's like the, the perfect encapsulation of like what happens with a long-term mindset. If you think about a goal and kind of work your goal for that end, it's. It's a really eye-opening book and eye-opening read every time you look at it. Exactly that was when he was down in South Africa. 

0:34:19 - Vikas Gupta

Yeah, cool, I'll have to check it out. I don't. I've only read most of the stuff I've read about him. You know World War two or post World War two, so that sounds like a free book. 

0:34:27 - Sean O'Dowd

Exactly which is which is that was the pinnacle. But this book is about like what he was doing to get to the pinnacle and it's really fascinating. We think realize well, like this was a 30 year journey, that he knew he was going on but he was really game for cool question number two what is more important to you, or most important to you investing in real estate, cash flow or appreciation? 

Optionally both, but I viewed his burden hand versus like two in the bush. Like if you are buying something on day one where you know you're gonna get cash flow and it's protected cash flow because it's a solid asset, then I'd take that cash flow. The appreciation bet is is risky. There's one one neighborhood in the Chicago area, for example it's about 40 minutes away from where I am that people have been saying is gonna be like this booming, really strong appreciation bet for about 30 years and it hasn't paid off yet. But people keep saying eventually it's going to and it's appreciation is two birds in the bush. 

0:35:21 - Vikas Gupta

Great, well, thank you for not hedging on that one. Our final question Any other pieces of advice for the audience that you we didn't get a chance to touch on during the rest of the podcast? 

0:35:31 - Sean O'Dowd

So it'll tie in to to the church a book. 

I think the the number one piece of advice that's been at least most helpful for me in my career is to think with the long-term Time, long-term lens and put in the work that others don't want to do over that long-term lens. So, for example, like Thinking about like what's what's gonna be great about one home versus another for 30 years from now, like a really good school district Is not gonna change 30 years, and putting in the work like we talked about, like the first thing, first thing we look at, it's the great schools which everybody can do. It takes 30 seconds to do the thing. That kind of sets the differentiator apart is we then get on the phone with a lot of people and each one of those zip codes and figure out the perception. That's a lot of work and very, very, very few people do that extra step, but it's also very easy to do just pick up the phone, start dialing. So Long-term lens and then putting in the work to to fulfill that long-term lens is then what's differentiated things for me. 

0:36:29 - Vikas Gupta

Got it great Well. Thank you so much again before we let you go, where can the audience find you? If they're interested in learning more about you, about the funds, help them out. 

0:36:39 - Sean O'Dowd

Yeah, totally so. I I'm pretty active on Twitter. I post a lot about what, what I'm doing and what I'm seeing on day-to-day basis. So that's. I think I'm Sean or dad at Sean or dad 15. I'm just on the 15th. It's on a dad. I'm very. I'm Sean Patrick. I've got. I'm about as Irish as you can get, so there's probably a 14 Others, an Ireland somewhere, and then email. I'm Sean at scholastic capitalcom. I'm. This is the stuff I love some. I'm always happy to chat real estate. Anyone wants to reach out and chat? 

0:37:04 - Vikas Gupta

Great. Well, I think this is gonna be a great episode. Thanks again, sean. 

0:37:07 - Sean O'Dowd

I appreciate it, thank you. 

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